Lecture 5

What is the minimum purchase value of Kelly's lemonade stand (PP&E)?

• 60,000

• 50,000

• 40,000

• Not enough information to estimate

As working capital increases, the .... on a company's balance CERTAINLY increases.

• Current Assets

• Cash

• Total Assets

• None of the above

Which value's changes over time best describe how well a business is doing?

• Operating income

• Net income (profit)

• Cash flow from operations

• Long-term liabilities

• Net cash flow

Assuming Kelly's personal marginal tax rate is about 10%, is it more advantageous for her to pay herself a salary or dividends in the last year (2026)? Which option would leave her with more cash after considering both corporate and individual taxes?

• Salary

• Dividends

• It doesn't make a difference

Since investors' expected return on their investments is usually higher than bank loan interest rates, is it better to pay off investors first, or lenders first?

• Pay investors first

• Pay lenders first